Major Pairs Analysis: Focus For EUR Continues To Be Flow Based

The euro is down by 30 pips following a better than expected U.S. retail sales report and unemployment claims tumbled. The euro reached a fresh four‐month high today, but failed to break above 1.3400. The focus for EUR continues to be flow based, with the more negative medium term fundamentals ignored. Markets are volatile into the NA open, with equities lower, bond yields lower, market volume higher and the USD broadly weaker. In terms of central banks, both South Korea and the RBNZ left rates on hold as expected. The decisions by both the Philippines and Indonesia to raise interest rates cause some surprise; Brazil eliminates the IOF tax on derivatives.
EUR/USD" width="624" height="468">
GBP/USD
The pound is little changed against the dollar ahead of the BoE's release of the minutes of its most recent policy meeting later this week. The Sterling erased a decline versus the greenback after a report showed U.S. retail sales increased less than economists forecast last month. It was also little changed against the euro, as U.K. home sellers raised asking prices to a record. Benchmark 10-year gilt yields were about five basis points from the lowest level in almost four weeks. The central-bank minutes, due July 17, will reveal how policy makers voted at Governor Carney’s first meeting. "The minutes will be absolutely critical, because everyone is going be looking at how Carney voted,” said Kathleen Brooks, research director at Forex.com, a unit of online currency-trading company Gain Capital Holdings Inc. (GCAP) “If he voted for further bond purchases, we are probably going to see a decline in the pound. The market is recalibrating its view on the fact that Carney is likely to be a dovish force at the Bank of England.
GBP/USD" width="624" height="468">
USD/JPY
The yen weakened for a second day against the dollar, amid speculation the Federal Reserve will reduce monetary stimulus while the Bank of Japan maintains its bond-buying program, which tends to debase the currency. The greenback pared gains versus the euro after U.S. retail sales rose less than forecast. The dollar was the best-performing major currency over the past six months amid bets the Fed will dial back its asset purchases. Australia’s dollar rose against most major peers after growth in China, its top trade partner, matched economists’ estimates in the second quarter. The Fed is inching toward less accommodation, and the BOJ is still full-steam ahead on accommodation,” Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York, said in a telephone interview. “On a day without much news, that will drive the price action." The yen sank 0.6 percent to 99.00 per dollar.
USD/JPY" width="624" height="468">
USD/CAD
The Canadian dollar declined, trimming again last week that was the biggest since December 2011, as U.S. retail sales rose less than projected in June, underscoring a second-quarter slowdown in the economy of Canada’s largest trading partner. The currency weakened for a second day as the yield advantage of U.S. 10-year notes compared with Canadian government debt was 13 basis points, approaching the 19-basis-point difference on July 5 that was the highest since 2011. The Bank of Canada will retain its 1 percent benchmark interest-rate target. The Canadian dollar dropped 0.3 percent to C$1.0420 per U.S. dollar.
USD/CAD" width="624" height="468">